ROXY Tires the manufacturer and exported company of tires. The company uses an activity based costing system for its overhead costs. The company has provided the following data concerning its activity-based costing system. Activity Cost pool Activity Measure Annual Activity Supporting Direct LaborDirect labor Hour $28 per DLH Order Processing Order $285 per OrderCustom design processingCustom design $185 per customer design Customer service customer $378 per customer Management would like an analysis of the profitability of a particular customer, Roxy Tires, which has ordered the following products over the last 12 months: Items…………………………….standard model……………….customer Design Number of Tires…………………20………………………………5 Number of orders……………….1……………………………….5 Number of customer designs……0………………………………5 Direct labor hour per Tires 26.5…………………………….28 Selling price per Tires……….$1900…………………………$2400 Direct material cost per tires…$565…………………………..$630 Required: Using the company’s activity-based –costing system, compute the customer margin of Roxy Tires for both standard and custom design model.

Customer Margin = Sales - Direct Materials - Direct Labor - overhead ABC i.e Activity based costing…

Answered: Using the company’s activity-based…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

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ROXY Tires the manufacturer and exported company of tires. The company uses an activity based costing system for its overhead costs. The company has provided the following data concerning its activity-based costing system.

Activity Cost pool	Activity Measure	Annual Activity

Supporting Direct Labor	Direct labor Hour	$28 per DLH


Order Processing	Order	$285 per Order
Custom design processing	Custom design	$185 per customer design


Customer service	customer	$378 per customer

Management would like an analysis of the profitability of a particular customer, Roxy Tires, which has ordered the following products over the last 12 months:

Items…………………………….standard model……………….customer Design Number of Tires…………………20………………………………5 Number of orders……………….1……………………………….5

Number of customer designs……0………………………………5

Direct labor hour per Tires 26.5…………………………….28

Selling price per Tires……….$1900…………………………$2400

Direct material cost per tires…$565…………………………..$630

Required:

Using the company’s activity-based –costing system, compute the customer margin of Roxy Tires for both standard and custom design model.

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